2014 (6) TMI 443

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....of income. According to the ld.representative, the provision for leave encashment is an allowable expenditure. The ld.representative placed his reliance on the judgment of the Apex Court in the case of Bharat Earth Movers Ltd vs CIT (2000) 245 ITR 428 (SC). 4. On the contrary, Smt. Latha V Kumar, the ld.DR submitted that sub clause (f) was introduction in section 43B by Finance, 2001 with effect from 01-04-2002. Admittedly, the assessee has not paid the leave encashment; it remained a provision. Under section 43B(f) unless the amount is paid in lieu of leave at the credit of the employee, it cannot be allowed as deduction. Referring to the judgment of the Calcutta High Court in Exide Industries Ltd & Anr vs UOI & Ors (2007) 292 ITR 470, the ld.DR submitted that the Calcutta High Court found that the provisions of section 43B(f) is arbitrary and de hors the Apex Court judgment in Bharat Earth Movers Ltd (supra); accordingly, the provisions of section 43B(f) was struck down. The ld.DR submitted that on appeal by the revenue the Apex Court stayed the judgment of the Calcutta High Court in Exide Industries Ltd & Anr (supra). Therefore, as on today, the provisions of section 43B(f) r....

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....) 325 ITR 523 (Ker). However, in respect of investment in the subsidiary companies and associate companies, the High Court had no occasion to consider the same. The ld.representative submitted that for the assessment year 2006-07, this Tribunal examined the issue after considering the judgment of the Kerala High Court for the assessment year 2004-05 in assessee's own case and found that the matter needs to be re-examined by the assessing officer. Accordingly, the matter was remanded back to the file of the assessing officer. The ld.representative further submitted that for the year under consideration, the investment made by the assessee was less than the profit of the year. Therefore, there is no question of any disallowance. According to the ld.representative, the borrowed funds were not used for making investments in the sister concerns as also in the associate concerns. 8. On the contrary, Smt. Latha V Kumar, the ld.DR submitted that on identical circumstances, this Tribunal, for the assessment year 2006-07 found that the judgment of the Kerala High Court in assessee's own case for the assessment year 2004-05 is in respect of investments made in the partnership firm. However....

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....xpenditure which was installed in the office premises as well as the telephone charges incurred for the benefit of the employees. According to the ld.representative, in respect of telephones installed at the residence of the employees can be considered for the purpose computation of fringe benefit; however, in respect of telephones installed at the office premises for the purpose of business cannot be treated as fringe benefit. Therefore, the assessing officer is not correct in disallowing the same. 12. On the contrary, Smt. Latha V Kumar, the ld.DR submitted that u/s 115WB(2)(J) use of telephone other than leased telephone shall be treated as fringe benefit. In this case, according to the ld.DR, it is not the case of the assessee that the expenses claimed are in respect of leased telephone lines. The deeming provision, according to the ld.DR, has to be applied for the purpose of disallowing the claim of the assessee with regard to telephone expenses other than leased telephones. 13. We have considered the rival submissions on either side and also perused the material available on record. Fringe benefit expenditure defined in section 115WB of the Act reads as follows: &nbs....

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..... The assessee has to file the details of expenditure with regard to the telephones which were installed for the benefit of the employee and in respect of the telephones which were installed in the office premises. Since the details are filed before this Tribunal, the matter needs to be examined by the assessing officer. Accordingly, the orders of lower authority are set aside and the issue is remanded back to the file of the assessing officer. The assessing officer shall re-examine and find out the place where the telephones were installed and the purpose for which they were installed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity of hearing to the assessee. 15. The next common issue arises for consideration is in respect of demo car. 16. Shri P.M. Veeramani, the ld.representative for the assessee submitted that the assessee was using the demo cars for test drive by the potential customers. These demo cars were taken to the fixed assets in the books of account and depreciation was also claimed on the same. According to the ld.representative, these are not benefits provided to the employee in consideration of their employment....